Lovesac Co
For the period ended Aug 4, 2024. Filed Sep 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 4, 2024 · Filed Sep 12, 2024
LOVE$15.80-4.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-05-05; filed 2024-06-13.
0001628280-24-028040
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-08-04; filed 2024-09-12.
0001628280-24-040192
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 88 previous paragraphs and 111 current paragraphs.
60 unchanged; 27 reworded; 19 added; 1 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (19)
Current report
Recent Developments
Current report
On June 11, 2024, our Board of Directors approved a share repurchase program for up to $40.0 million of shares of our common stock. Under the share repurchase program, we may repurchase shares from time to time in the open market, privately negotiated transactions and accelerated share repurchases. The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. The exact number of shares to be repurchased by the Company, if any, is not guaranteed. Depending on market conditions and other factors, these repurchases may be commenced or suspended at any time or periodically without prior notice. We plan on funding repurchases with our current cash and cash equivalents and future cash flows.
Current report
Showroom net sales increased $0.6 million, or 0.6%, in the thirteen weeks ended August 4, 2024 compared to the prior year period.
Current report
Selling, general and administrative (SG&A) expenses
Current report
SG&A expenses increased $9.9 million, or 15.4%, in the thirteen weeks ended August 4, 2024 compared to the prior year period. The increase was primarily related to an increase of $6.4 million in payroll, $1.5 million in equity-based compensation, $0.9 million in professional fees, $0.7 million in rent, and $0.5 million in other investments in the business to support current and future growth. As a percentage of net sales, SG&A was 47.0% for the second quarter of fiscal 2025 compared to 41.3% for the second quarter of fiscal 2024.
Current report
Twenty-six weeks ended August 4, 2024 compared to the twenty-six weeks ended July 30, 2023
Current report
Net sales
Current report
Net sales decreased $6.5 million, or 2.2%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period driven by a decrease of 10.0% in omni-channel comparable net sales, partially offset by new showroom openings. New customers increased by 3.4% in the twenty-six weeks ended August 4, 2024 compared to an increase of 19.0% in the prior year period.
Current report
Gross profit
Current report
SG&A expenses increased $21.7 million, or 18.0%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. The increase was primarily related to an increase of $10.4 million in payroll, $5.5 million in professional fees, $1.9 million in equity-based compensation, $1.8 million in other investments in the business to support current and future growth, and $1.7 million in rent. As a percentage of net sales, SG&A was 49.1% in the twenty-six weeks ended August 4, 2024, compared to 40.7% in the prior year period.
Current report
Advertising and Marketing
Current report
Advertising and marketing expenses decreased $2.1 million, or 4.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. Advertising and marketing expenses were 14.3% of net sales in the twenty-six weeks ended August 4, 2024 compared to 14.7% of net sales in the prior year period.
Current report
Depreciation and amortization expenses
Current report
Depreciation and amortization expenses increased $1.5 million, or 24.4%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.
Current report
Interest income, net
Current report
Benefit from income taxes
Current report
On March 24, 2023, we amended the credit agreement to extend the maturity date to September 30, 2024. On July 29, 2024, we amended the credit agreement to add an uncommitted accordion feature that allows the Company, subject to certain customary conditions, to increase the size of the revolving credit facility by $10 million and, among other things, extend the maturity date of the loans made under the Amendment from September 30, 2024 to July 29, 2029.
Current report
Share Repurchase
Current report
On June 11, 2024, our board of directors authorized a share repurchase program for up to $40.0 million of shares of our common stock. Under the share repurchase program, we may repurchase shares from time to time in the open market, privately negotiated transactions and accelerated share repurchase. The timing, volume and nature of share repurchases, if any, will be at our sole discretion and will be dependent on market conditions, liquidity, applicable securities laws, and other factors. We may suspend or discontinue the share repurchase program at any time. We have not purchased any of our equity securities under the program to date. We plan on funding any repurchases in the future with our current cash and cash equivalents and future cash flows.
Removed paragraphs (1)
Previous report
Selling, general and administrative expenses increased $11.9 million, or 21.0%, in the thirteen weeks ended May 5, 2024 compared to the prior year period. The increase in selling, general and administrative expenses was primarily related to an increase in overhead expenses, payroll, rent, and selling related expenses. Overhead expenses increased $6.3 million consisting mainly of increases of $4.5 million in professional fees, $1.2 million in other investments in the business to support current and future growth, and $0.5 million in equity-based compensation. Payroll costs increased by $4.0 million driven by an increase in new hires. Rent increased by $1.0 million related to a $1.4 million increase in rent expense from our net addition of 35 showrooms partially offset by a $0.4 million reduction in percentage rent. Selling related expenses increased $0.6 million principally due to credit card fees related to an increase in credit card rates. Selling, general and administrative expenses were 51.6% of net sales in the thirteen weeks ended May 5, 2024, compared to 40.0% of net sales in the prior year period.
Reworded paragraphs (27)
Previous wording
There are a number of macroeconomic factors and uncertainties affecting the overall business environment and our business, including increased inflation, elevated interest rates, weak housing market conditions, consumer debt and available credit, layoffs, political uncertainty, global conflicts and uncertainties in the global financial markets. These factors may have a negative impact on markets in which we operate, including the potential for an economic recession, a continued downturn in the housing market, and a reduction in consumer discretionary spending. We believe that these macroeconomic factors have contributed to the slowdown in demand that we have experienced in our business which may continue in future periods.
Current wording
There are a number of macroeconomic factors and uncertainties affecting the overall business environment and our business, including increased inflation, elevated interest rates, weak housing market conditions, consumer debt and available credit, layoffs, political uncertainty, global conflicts and uncertainties in the global financial markets. These factors have had and may continue to have a negative impact on markets in which we operate, including the potential for an economic recession, a continued downturn in the housing market, and a reduction in consumer discretionary spending. We believe that these macroeconomic factors have caused a significant shift in consumer spending and a decline in the demand for home furnishings which has contributed to the slowdown in demand that we have experienced in our business which may continue in future periods.
Previous wording
•Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing only two, standardized pieces, “seats” and “sides,” and approximately 200 high quality, tight-fitting covers that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization is further enhanced with our specialty-shaped modular offerings, such as our wedge seat, roll arm and angled sides. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 91.8% and 90.6% of our net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Current wording
•Sactionals. Our Sactional product line currently represents a majority of our net sales. We believe our Sactionals platform is unlike competing products in its adaptability yet is comparable aesthetically to similarly priced premium couches and sectionals. Our Sactional products include a number of patented features relating to their geometry and modularity, coupling mechanisms and other features. Utilizing only two, standardized pieces, “seats” and “sides,” and approximately 200 high quality, tight-fitting covers that are removable, washable, and changeable, customers can create numerous permutations of a sectional couch with minimal effort. Customization is further enhanced with our specialty-shaped modular offerings, such as our wedge seat, roll arm and angled sides. Our custom features and accessories can be added easily and quickly to a Sactional to meet endless design, style, storage and utility preferences, reflecting our Designed for Life philosophy. Sactionals are built to meet the highest durability and structural standards applicable to fixed couches. Sactionals are comprised of standardized units and we guarantee their compatibility over time, which we believe is a major pillar of their value proposition to the consumer. Our Sactionals represented 91.3% and 90.9% of our net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 91.5% and 90.8% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.
Previous wording
•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sac product line offers 5 different sizes ranging from 35 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a proprietary blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. Our Sacs represented 6.7% and 7.6% of our net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Current wording
•Sacs. We believe that our Sacs product line is a category leader in oversized beanbags. The Sac product line offers 5 different sizes ranging from 35 pounds to 95 pounds with capacity to seat 3+ people on the larger model Sacs. Filled with Durafoam, a proprietary blend of shredded foam, Sacs provide serene comfort and guaranteed durability. Their removable covers are machine washable and may be easily replaced with a wide selection of cover offerings. Our Sacs represented 7.4% and 7.5% of our net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 7.1% and 7.6% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.
Previous wording
•Other. Our Other product line complements our Sacs and Sactionals by increasing their adaptability to meet evolving consumer demands and preferences. Our current product line offers Sactional-specific drink holders, Footsac blankets, decorative pillows, fitted seat tables and ottomans in varying styles and finishes and our unique Sactionals Power Hub, providing our customers with the flexibility to customize their furnishings with decorative and practical add-ons to meet evolving style preferences.
Current wording
•Other Our Other product line enhances the versatility of our Sacs and Sactionals, catering to the evolving demands and preferences of our customers. In May 2024, we launched the PillowSac Accent Chair Frame, an accessory that elevates the style and comfort of our existing PillowSac. Our current offerings also include Sactional-specific drink holders, Footsac blankets, decorative pillows, fitted seat tables, ottomans in various styles and finishes, and the unique Sactionals Power Hub. These products provide our customers with the flexibility to personalize their furnishings with both decorative and practical add-ons, ensuring they can adapt to changing style preferences
Previous wording
•Showrooms. We market and sell our products through 246 showroom locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 42 states in the U.S. We carefully select the best small-footprint showroom locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-store sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms is designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. Our showroom concept emphasizes our unique product platform and utilizes technology in more experiential ways to increase traffic and net sales. Net sales generated by this channel accounted for 61.5% and 59.2% of total net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Current wording
•Showrooms. We market and sell our products through 254 showroom locations at top tier malls, lifestyle centers, mobile concierge, kiosk, and street locations in 42 states in the U.S. We carefully select the best small-footprint showroom locations in high-end malls and lifestyle centers for our showrooms. Compared to traditional retailers, our showrooms require significantly less square footage because of our need to have only a few in-store sample configurations for display and our ability to stock our inventory for immediate sale. The architecture and layout of these showrooms is designed to communicate our brand personality and key product features. Our goal is to educate first-time customers, creating an environment where people can touch, feel, read, and understand the technology behind our products. Our showroom concept emphasizes our unique product platform and utilizes technology in more experiential ways to increase traffic and net sales. Net sales generated by this channel accounted for 63.1% and 63.6% of total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 62.4% and 61.5% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.
Previous wording
•Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. With furniture especially suited to ecommerce applications, our net sales generated by this channel accounted for 27.6% and 28.5% of total net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Current wording
•Ecommerce. Through our ecommerce channel, we believe we are able to significantly enhance the consumer shopping experience for home furnishings, driving deeper brand engagement and loyalty, while also realizing more favorable margins than our showroom locations. We believe our robust technological capabilities position us well to benefit from the growing consumer preference to transact at home and via mobile devices. With furniture especially suited to ecommerce applications, our net sales generated by this channel accounted for 28.3% and 26.8% of total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 28.0% and 27.6% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.
Previous wording
◦In store and online pop-up-shops. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low cost alternative to drive brand awareness, in store net sales, and ecommerce net sales. These in store pop-up-shops are typically 10-day shows and are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. For the thirteen weeks ended May 5, 2024 and April 30, 2023, we operated 120 and 95 in store pop-up-shops, respectively, and 3 and 2 online pop-up-shops on Costco.com, respectively.
Current wording
◦In store and online pop-up-shops. We utilize in store pop-up-shops to increase the number of locations where customers can experience and purchase our products, a low cost alternative to drive brand awareness, in store net sales, and ecommerce net sales. These in store pop-up-shops are typically 10-day shows and are staffed similarly to our showrooms with associates trained to demonstrate and sell our products and promote our brand. For the thirteen weeks ended August 4, 2024 and July 30, 2023, we operated 138 and 100 in store pop-up-shops, respectively, and 2 and 3 online pop-up-shops on Costco.com, respectively, and for the twenty-six weeks ended August 4, 2024 and July 30, 2023, we operated 258 and 195 in store pop-up-shops, respectively, and 5 and 5 online pop-up-shops on Costco.com, respectively.
Previous wording
◦Shop-in-shops. Shop-in-shops are designed to be in permanent locations carrying the same digital technology of our showrooms and are also staffed with associates trained to demonstrate and sell our products. Shop-in-shops require less capital expenditure to open a productive space to drive brand awareness and touchpoint opportunities for demonstrating and selling our products. As of May 5, 2024 and April 30, 2023, we operated 51 and 23 Best Buy shop-in-shops, respectively.
Current wording
◦Shop-in-shops. Shop-in-shops are designed to be in permanent locations carrying the same digital technology of our showrooms and are also staffed with associates trained to demonstrate and sell our products. Shop-in-shops require less capital expenditure to open a productive space to drive brand awareness and touchpoint opportunities for demonstrating and selling our products. As of August 4, 2024 and July 30, 2023, we operated 51 and 25 Best Buy shop-in-shops, respectively.
Previous wording
Other net sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 10.9% and 12.3% of our total net sales for the thirteen weeks ended May 5, 2024 and April 30, 2023, respectively.
Current wording
Other net sales which includes pop-up-shop sales, shop-in-shop sales, and barter inventory transactions accounted for 8.6% and 9.6% of our total net sales for the thirteen weeks ended August 4, 2024 and July 30, 2023, respectively, and 9.6% and 10.9% of our net sales for the twenty-six weeks ended August 4, 2024 and July 30, 2023, respectively.
Previous wording
The following table summarizes key components of our results of operations for the thirteen weeks ended May 5, 2024 and April 30, 2023:
Current wording
The following tables summarize key components of our results of operations for the thirteen and twenty-six weeks ended August 4, 2024 and July 30, 2023:
Previous wording
(1) Showrooms open at the end of the period include 1 kiosk and 2 mobile concierges as of May 5, 2024, and 13 kiosks and 2 mobile concierges as of April 30, 2023.
Current wording
(1) Showrooms open at the end of the period include 1 kiosk and 2 mobile concierges as of August 4, 2024, and 9 kiosks and 2 mobile concierges as of July 30, 2023.
Previous wording
Net sales decreased $8.6 million, or 6.1%, in the thirteen weeks ended May 5, 2024 compared to the prior year period driven by a decrease of 14.8% in omni-channel comparable net sales, partially offset by new showroom openings. New customers decreased by 5.7% in the thirteen weeks ended May 5, 2024 compared to an increase of 25.0% in the prior year period.
Current wording
Net sales increased $2.1 million, or 1.3%, in the thirteen weeks ended August 4, 2024 compared to the prior year period driven by new showroom openings, partially offset by a decrease of 5.4% in omni-channel comparable net sales. New customers increased by 12.9% in the thirteen weeks ended August 4, 2024 compared to an increase of 14.5% in the prior year period.
Previous wording
Internet net sales (sales made directly to customers through our ecommerce channel) decreased $3.6 million, or 9.0%, in the thirteen weeks ended May 5, 2024 compared to the prior year period.
Current wording
Internet net sales (sales made directly to customers through our ecommerce channel) increased $2.9 million, or 7.0%, in the thirteen weeks ended August 4, 2024 compared to the prior year period.
Previous wording
Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $3.0 million, or 17.1%, in the thirteen weeks ended May 5, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 28 additional Best Buy shop-in-shop location compared to the prior year period.
Current wording
Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $1.4 million, or 9.3%, in the thirteen weeks ended August 4, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 26 additional Best Buy shop-in-shop locations as of August 4, 2024 compared to July 30, 2023.
Previous wording
Advertising and marketing expenses increased $1.1 million, or 6.4%, in the thirteen weeks ended May 5, 2024 compared to the prior year period. Advertising and marketing expenses were 13.6% of net sales in the thirteen weeks ended May 5, 2024 compared to 12.0% of net sales in the prior year period.
Current wording
Advertising and marketing expenses decreased $3.2 million, or 12.2%, in the thirteen weeks ended August 4, 2024 compared to the prior year period. Advertising and marketing expenses were 14.9% of net sales in the thirteen weeks ended August 4, 2024 compared to 17.2% of net sales in the prior year period.
Previous wording
Depreciation and amortization expenses increased $0.7 million, or 24.1%, in the thirteen weeks ended May 5, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.
Current wording
Depreciation and amortization expenses increased $0.8 million, or 24.6%, in the thirteen weeks ended August 4, 2024 compared to the prior year period primarily driven by capital investments for new showrooms.
Previous wording
Interest income, net was $0.7 million for the thirteen weeks ended May 5, 2024, compared to $0.3 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.
Current wording
Interest income, net was $0.7 million for the thirteen weeks ended August 4, 2024, compared to $0.4 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.
Previous wording
Showroom net sales decreased $2.0 million, or 2.3%, in the thirteen weeks ended May 5, 2024 compared to the prior year period.
Current wording
Showroom net sales decreased $1.4 million, or 0.8%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period.
Previous wording
Gross profit increased $1.4 million, or 2.1%, in the thirteen weeks ended May 5, 2024 compared to the prior year period. Gross margin increased 430 basis points to 54.3% of net sales in the thirteen weeks ended May 5, 2024 from 50.0% of net sales in the prior year period primarily driven by a decrease of 790 basis points in inbound transportation costs, partially offset by an increase of 240 basis points in higher outbound transportation and warehousing costs and a decrease of 120 basis points in product margin driven by higher promotional discounting.
Current wording
Gross profit increased $1.4 million, or 0.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period. Gross margin increased 170 basis points to 56.8% of net sales in the twenty-six weeks ended August 4, 2024 from 55.1% of net sales in the prior year period primarily driven by a decrease of 420 basis points in inbound transportation costs, partially offset by an increase of 130 basis points in outbound transportation and warehousing costs and a decrease of 120 basis points in product margin driven by higher promotional discounting.
Previous wording
Income tax benefit was $4.2 million for the thirteen weeks ended May 5, 2024, compared to $1.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.
Current wording
Income tax benefit was $6.0 million for the twenty-six weeks ended August 4, 2024, compared to $1.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.
Previous wording
Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At May 5, 2024, we had $72.4 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.
Current wording
Our business relies on cash flows from operations, our revolving line of credit (see “Revolving Line of Credit” below) and securities issuances as our primary sources of liquidity. At August 4, 2024, we had $72.1 million in cash and cash equivalents. Our primary cash needs are for marketing and advertising, inventory, payroll, showroom rent, capital expenditures associated with opening new showrooms and updating existing showrooms, as well as infrastructure and information technology. In the future, we may also use cash to repurchase shares of our common stock under our share repurchase program. The most significant components of our working capital are cash and cash equivalents, merchandise inventory, prepaid expenses, accounts payable, accrued expenses, customer deposits, and other current liabilities. We believe that cash expected to be generated from operations, the availability under our revolving line of credit and our existing cash balances are sufficient to meet working capital requirements and anticipated capital expenditures for at least the next 12 months.
Previous wording
Historically, we have invested significant capital expenditures in opening new showrooms and updating existing showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional showrooms. Capital expenditures are anticipated to support our showroom growth, including capital outlays for leasehold improvements, fixtures and equipment, and the construction of new showrooms. Cash paid for capital expenditures was $7.3 million in the thirteen weeks ended May 5, 2024.
Current wording
Historically, we have invested significant capital expenditures in opening new showrooms and updating existing showrooms. These capital expenditures have increased in the past and may continue to increase in future periods as we open additional showrooms. Capital expenditures are anticipated to support our showroom growth, including capital outlays for leasehold improvements, fixtures and equipment, and the construction of new showrooms. Cash paid for capital expenditures was $13.5 million in the twenty-six weeks ended August 4, 2024.
Previous wording
Net cash used in operating activities was $7.0 million in the thirteen weeks ended May 5, 2024, compared to net cash provided by operating activities of $6.3 million in the prior year period, primarily driven by higher net loss and changes in working capital related to inventory management actions, customer deposits, and timing of payments to vendors, partially offset by cash inflow from trade accounts receivable mainly due to timing of collections from our customers.
Current wording
Net cash used in operating activities was $0.8 million in the twenty-six weeks ended August 4, 2024, compared to net cash provided by operating activities of $27.3 million in the prior year period, primarily driven by higher net loss and changes in working capital related to income taxes paid, inventory management actions, and timing of payments to vendors.
Previous wording
For the thirteen weeks ended May 5, 2024 and April 30, 2023, net cash used in investing activities were $7.3 million and $4.2 million, respectively, mainly as a result of investments in new showrooms.
Current wording
For the twenty-six weeks ended August 4, 2024 and July 30, 2023, net cash used in investing activities were $13.5 million and $12.5 million, respectively, mainly as a result of investments in new showrooms.
Previous wording
For the thirteen weeks ended May 5, 2024 and April 30, 2023, net cash used in financing activities was $0.4 million and $0.5 million, respectively, mostly due to taxes paid for the net share settlement of equity awards.
Current wording
For the twenty-six weeks ended August 4, 2024 and July 30, 2023, net cash used in financing activities was $0.6 million and $3.6 million, respectively, mostly due to taxes paid for the net share settlement of equity awards.
Previous wording
On March 24, 2023, we amended the credit agreement to extend the maturity date to September 30, 2024. All other terms of the credit agreement remain unchanged. For additional information regarding our line of credit with Wells Fargo Bank, see Note 7. Financing Arrangements. As of May 5, 2024 and February 4, 2024, the Company’s borrowing availability under the line of credit was $33.7 million and $36.0 million, respectively, and there were no outstanding borrowings under our credit facility.
Current wording
For additional information regarding our line of credit with Wells Fargo Bank, see Note 7. Financing Arrangements. As of August 4, 2024 and February 4, 2024, the Company’s borrowing availability under the line of credit was $36.0 million, and there were no outstanding borrowings under our credit facility.
Previous wording
The discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in conformity with GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see Note 1 to our financial statements included on Form 10-K for the fiscal year ended February 4, 2024 for a complete description of our significant accounting policies. There have been no material changes to the significant accounting policies during the thirteen weeks ended May 5, 2024.
Current wording
The discussion and analysis of financial condition and results of operations is based upon our condensed financial statements, which have been prepared in conformity with GAAP. Certain accounting policies and estimates are particularly important to the understanding of our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degree of uncertainty. In applying these policies, management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Please see Note 1 to our financial statements included on Form 10-K for the fiscal year ended February 4, 2024 for a complete description of our significant accounting policies. There have been no material changes to the significant accounting policies during the twenty-six weeks ended August 4, 2024.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Gross profit remained flat in the thirteen weeks ended August 4, 2024 compared to the prior year period. Gross margin decreased 80 basis points to 59.0% of net sales in the thirteen weeks ended August 4, 2024 from 59.8% of net sales in the prior year period primarily driven by a decrease of 110 basis points in product margin driven by higher promotional discounting and an increase of 50 basis points in outbound transportation and warehousing costs, partially offset by a decrease of 80 basis points in inbound transportation costs.
Current report — wording carried from elsewhere
Income tax benefit was $1.8 million for the thirteen weeks ended August 4, 2024, compared to less than $0.1 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate.
Current report — wording carried from elsewhere
Internet net sales (sales made directly to customers through our ecommerce channel) decreased $0.8 million, or 0.9%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period.
Current report — wording carried from elsewhere
Other net sales, which include pop-up-shop sales, shop-in-shop sales, and barter inventory transactions decreased $4.4 million, or 13.5%, in the twenty-six weeks ended August 4, 2024 compared to the prior year period primarily driven by lower productivity of our Costco in-store and online pop-up-shops on Costco.com, partially offset by 26 additional Best Buy shop-in-shop locations as of August 4, 2024 compared to July 30, 2023.
Current report — wording carried from elsewhere
Interest income, net was $1.4 million for the twenty-six weeks ended August 4, 2024, compared to $0.7 million in the prior year period. Interest income earned on the Company’s cash and cash equivalents balances was favorable from higher interest rates compared to the prior year period.